S&P 500 and Dow 30 – Bearish Turnaround For US Market

There is no certainty in markets, and that goes for expectations as well. Even though it was expected that US session would be more bullish compared to Asian and European sessions, the opposite happened. The rebound in Future prices happened earlier than expected, with late Asian and early European session managing to push both S&P 500 and Dow 30 up towards their respective resistance levels, only to have US session sending price deep in the red.

This time round, the 0.90% decline in both S&P 500 and Dow 30 physical stock indexes is an accurate reflection of the bearishness in US markets, unlike the losses we’ve seen on Monday and Wednesday. The main driver for yesterday’s extreme bearishness can be attributed to a better than expected Initial Jobless Claims, which came in at 308K vs 315K expected. This better than expected economic news resulted in a bearish push as market regarded it as a nudge closer to Bernanke’s QE Tapering action. Besides fundamentals, there was a terrorist scare at the White House which heightened risk off sentiment and sent stock prices even lower.

S&P 500 Hourly Chart

From a technical perspective, the bearish momentum that started from 2nd Oct high does not appear to be over yet. This can be seen from the fact that the initial technical pullback from 1,700 during US midday was followed by an equally strong bearish rejection off 1,682 support turned resistance. This is echoed by Stochastic indicator which has yet to enter into the Oversold region despite recent sell-offs. With prices currently testing the 1,672.5 level, there is a chance that the support will buckle. But given that current Stoch readings are already close to the Oversold region, it is hard to imagine prices being able to break 1,670 and forge new lows before US market comes into play again. Hence, we could see prices rebounding towards 1,680, with Stoch curve forming a lower interim peak before US session take us lower today.

Dow 30 Hourly Chart

This applies to Dow 30 as well, but price is even more bearish here as we are trading below the key 15,000 level. There is a chance that Dow 30 may actually push lower during Asian/European session and we may see quick bearish acceleration if yesterday’s swing low is broken. The correlation with S&P 500 may cause the latter to be dragged lower as well despite short-term bullish pullback are expected.

As a side note, there will not be any NFP numbers released today due to the US Government Shutdown. The same for any other US based numbers expected today. Hence everything will be pure sentiment/technical driven today, and if we are indeed able to break new lows and close this week close to these lows, this will be a big sign that market is extremely bearish and we could see more to come in the week next.

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